take-home pay. that should be your message. then, republican lawmakers turn up the heat on the white house over the attacks in libya, even suggestions there was a cover up. take a listen. >> we were attacked, apparently by al qaeda. >> we'll leave that up to you decide whether or not that was a cover-up. >> they haven't wanted to level with the american people. >> there are reports the white house knew it was a terror attack 24 hours after the incident. now some senators are demanding ambassador susan rice say why, she said it wasn't. what did the white house know and when did it know it? plus, a new survey from ceos, does the pessimism spell trouble for president obama and maybe the rest of us also? president obama and mitt romney meanwhile battling it out in the swing state of ohio. john harwood joins us now with all the details. good evening, john. >> good evening, larry. you know, in the wake of that 47% video last week, mitt romney's got a new message and

that's to tell middle class people as well as the poor that he cares about them. he did it on the stump in ohio today, he also did it in an interview with our nbc colleague ron allen just a few minutes ago. here's mitt romney. >> i served as a pastor of a congregation with people of all different backgrounds and economic circumstances that i care very deeply about the american people and people of different socioeconomic circumstances. and i think throughout this campaign, as well, we've talked about my record in massachusetts. don't forget, i've got everybody in my state insured. >> and here's some numbers, larry, that show you why that is mitt romney's message rather than tax cuts. you can't compare in the state of ohio where a new york times cbs poll shows mitt romney down by ten percentage points, president obama ahead on the economy, 6 in 10 voters, nearly 6 in 10, that is, said mitt romney's policies would favor the rich and mitt romney doesn't care about people like them. president obama's driving that

message, going after mitt romney's predictions that he'll be tough on china saying that if you look at romney's record at bain capital, all that talk is fake. >> when you hear this newfound outrage, when you see these ads, these running problems seem to get tough on china, it seems a lot like that fox saying we need more secure chicken coops. i mean, it's just not credible. >> and larry, you can hear the confidence in president obama's voice because not only in ohio is he ahead, but in all of the major swing states president obama's got a lead right now. mitt romney's got to find a way to turn that around, turn it around in the debates, and maybe the tax cut issue that you're talking about will be one tool in that arsenal. back to you, larry. >> many thanks to john harwood. now for some reason on the trail

today, mitt romney said he's going to dial back on taxes. >> individual income taxes are the ones i want to reform, make them simpler, bring the rates down. by the way, don't be expecting a huge cut in taxes because i'm also going to lower deductions and exemptions. >> all right. i don't get any of that. i'm not sure what his message was. let me say this. household incomes are down over 8%, another 1% in august alone reported this morning. the labor force, shrinking, poverty way up, president obama himself offers no middle class tax cuts, he just wants to extend them, not new ones. there's no answers to this. it's mitt romney who has got to stay on the pro-growth message, take-home pay. take-home pay. i talked about it the last couple of nights, wrote a column on it. today he just seemed to go off track and it blows my mind. let's get insight from inside the romney campaign. he's a senior economic adviser with the campaign. you have to explain this to me,

this is time mr. romney should be talking about middle income tax cuts. he's got a great reform plan, and he's got to help average americans losing money on a daily basis. what's going on here? why is he dialing back his tax cut plan? >> oh, well, larry, certainly not doing that, and it's really very consistent with what he's been saying on the stump ever since he announced this great plan and he's emphasized this is a tremendous pro-growth, pro-jobs tax plan, marginal tax cuts, and it's going to produce 7 million jobs over the next seven years. contrast that with the president's plan which we know is to raise taxes. >> i've known you a long time. what did he say? he didn't say what you just said. i know you're a supply sider. i go et that. he said today, don't expect big tax cuts, then went off talking about eliminating tax deductions. and you take a look, dropping the tax rate by 20% across the board for middle-income people,

you can have -- you can have tax run 3,000 all the way up to 12,000. those are tremendous tax savings. that's what mitt romney should be talking about. income going down, he wants to boost take-home pay. why isn't he saying i want to boost take-home pay instead of don't expect much in tax cuts. >> larry, i love you the way you make the case and, look, he does too. and it's going to produce -- it's going to generate 7 million jobs over ten years, .5% growth in gdp. what he's referring to the fact we're not going to let this increase the deficit. and so the growth in revenues as a result of the economic growth is going to pay for that in part, and we're also going to make the tax system flatter and fairer and simpler which is something else conservatives have wanted, which is also pro-growth. and that's the part the governor is emphasizing. >> he says don't expect any big tax cuts. first of all, you guys ought to

pledge to the middle class those middle brackets. i'm not talking about the upper. the upper should lose their tax deductions and everything should be on the table. but i'm talking about the brackets that are around 15% to 28%, jim. that's where the take home is going to rise. you ought to say we're going to leave your deductions alone. we're going to take it out of the high of the upper income people because we're giving them a big tax cut. the middle class, he shouldn't even suggest they're going to be tax deductions. i wrote a column about this. i said use reagan's slogan. use reagan's slogan. all right. take-home pay, that's something that families around the kitchen table can understand. that's not what mitt romney said today. what mitt romney said today is i'm going to take away your tax deductions and don't expect much in the way of tax cuts. that is not kitchen table and not raising take-home pay and that's why i'm so darn angry. >> welm, larry, he's talked a lot about job growth too, and that's something the average person understands and knows we need. economic growth, pro-growth for

the middle class. >> you've got to connect the dots. you've got to connect. i'm sorry, i shouldn't interrupt. let me calm down. jim, i jus want to say this. you've got to connect the dots. his intention is good, he wants to create jobs. he has a tax cut plan. you need to connect the dots between the lower tax cuts, right, the higher incomes after tax, take-home pay and growth. if you do that, you'll win. if you say don't expect much in tax cuts and you start talking about eliminating deductions, you're not connecting the dots. i will shut up and let you finish your sentence. >> i will say every time he's on the stump, larry, and today was consistent with that in terms of describing the package, he hammers on the fact that this is going to create jobs and economic growth for people by cutting taxes, encouraging investment, and encouraging growth and putting money in people's pockets. he has been consistent with it. today he emphasized a little bit the other side of this. look, we're going to reform deductions and that's part of the way we're going to keep this

from increasing the deficit. the other way is through the kind of growth you're talking about and he talks about. and it's also important to contrast that with what the president wants to do which we know is to raise taxes. >> the president has no tax cuts for the middle class, he's extending the bush tax cuts for the middle class and if he wants to raise taxes on investors and small business. >> and he's already raised taxes 19 times and obama care. >> this is mitt romney's thing. go on whatever you've got there, you will see right up at the top, it's the lead article, romney tempers tax cut plan. and earlier today, the sub-heading was he's dialing back the tax cut. that's not the kind of thing anybody wants to read. guys like me who are in the growth, supply side, reagan wing of the party. that is not what we want to hear. and that's not going to win for him. you know? mccain didn't win because he didn't have a real growth plan. bob dole didn't win because he didn't have a growth plan. you get my drift?

you get my drift. growth republicans like reagan win. >> i get your drift, but i've got to tell you, we got a growth plan including the tax cuts at the energy plan, the trade, we're talking $12 million over ten years. it's a powerful plan. and the governor's message and including the tax reform piece of it that's going to lower the transaction costs of the code and contribute to growth. and the message is received. he will continue doing all that. but he's going to talk about -- >> i'm not a happy camper. i'm not a happy camper. >> it's half your value, larry. >> it's not about you, but you know my views. anyway, thank you. i'm sorry i interrupted. i know you worked hard to get on the set and help us tonight. i totally apologize for my interruption. >> not at all. >> jim talent, and now a senior economic adviser with the romney campaign. i thank you. i thank you.

>> thank you, larry. >> let's get reaction from our panel who i hope heard that little discussion. ed rendell is back, former dnc chairman, former pennsylvania governor. american enterprise institute fellow, former george w. bush speech writer. ed rendell, if i may, you must have loved hearing that. me putting -- by the way, while this is all happening, i get a call from another one of romney's top economic advisers saying we didn't mean it. when i read something in the paper and i see the tape, i believe it when someone says something. and right now, i've got to tell you, i don't know -- and if i don't know, i'm smarter than your average bear. if i don't know what mitt romney's plan is, i've got to believe a whole lot of americans don't know what the hell his plan is either. this is a nice leather-high fast ball for you and i'm going to turn it over. >> i do say you've never apologized for interrupting me. but number two, i just want to correct one thing, president obama has cut taxes for the middle class. he did it in the stimulus where

everyone received -- every family received an $800 cut, and he did it in payroll reductions and, in fact, the was the republicans who wanted too peel back that tax cut on payroll deductions. so just to be accurate, he has made two significant tax cuts in the bottom line take home pay of americans. >> but my problem -- no, i'm sorry, i do not want to interrupt. >> no, go ahead. i'm done. go ahead. >> no, no, my problem with it, and i've said this before. and he throws a number out, something like $3,600 for middle income tax cuts. those are temporary tax cuts. they're just temporary and you lose them after a year. i want tax reform the lowest marginal tax rate on a permanent basis. mark, welcome to the show. look, this may be a family feud, maybe not. my job is not to cheerlead for romney. my job is tough love of some kind. if he says he's going to lower your tax rates and particularly middle income tax rates and goes

out in ohio which is a swing state and may be getting clobbered at the polls. why in the world, mark, you're an ex-speech writer for george w., why in the world would he say don't expect big tax cuts? why would he start talking about he's going to take the tax deductions away from middle-income people? that's not a message they want to hear. that's a draconian austerity message that makes no sense at all. >> i'm with you on the tough lolo love, larry. what you're saying about take-home pay is hugely, hugely important. we just learned a the the beginning of your show that family income has gone down 8.1% since barack obama took office. and that is the standard by which obama asked us to judge his president. if you recall back in 2008 when he gave that campaign speech in front of the styrofoam columns when he was running with the president for the first time, he gave a devastating critique and

he said -- i'm going to give you a quote. we have a different measure. we read your progress in the 23 million jobs created under bill clinton when the average american family felt income go up by 7,500 instead of down 2,000 like george w. bush. that that's the standard he set. he's a failure, the family income has gone down $4,000 in 3 1/2 years under obama compared to $2,000 under george w. in eight years. >> because of that family income, that's not a made up number, that's a government number. i think both of these guys should be looking for permanent middle class tax cuts. permanent middle class tax cuts so that take-home pay will go up. i'll give you the last word. >> i found myself strangely agreeing with your plan to cut the middle class and take away the deductions and keep tax rates for people who make a lot of money like you and i fairly high. i think that makes abundant good sense. but we're forgetting one thing.

the biggest challenge may be even more than anything is our debt and our deficit. and i think with governor romney and paul ryan figured out was they can't give $5 trillion worth of tax cuts and still eat into the deficit, which i think is our biggest national problem. >> i think -- >> you're right. he might be able to do it. he might be able to do it if they did your plan. >> i'm telling you. you know, you were a good tax break governor. the pennsylvania tax break today is still very low. what is it? about 3%? >> the effective rate is 3.4%. >> do you know how amazing that is for the northeast and east? that's an amazing thing. that makes you a supply sideer. i don't want you to lose all your friends, but i think you're a supply sider with a 3.5% income tax. >> oh, my gosh. >> thank you very much. we'd love to have you back. coming up on kudlow, congressional republicans demand answers from the administration on who knew what and when on the terror attack in libya that killed our distinguished

ambassador chris stevens. is there a cover-up going on here? senator ron johnson sounds off. and folks, one more time, don't forget, free market capitalism is the best path to prosperity. lower those tax breaks and get rid of those deductions. it can work, i've seen it work in 1986. it'll work again. two years ago, the people of bp made a commitment to the gulf. and every day since, we've worked hard to keep it. bp has paid over twenty-three billion dollars to help people and businesses who were affected, and to cover cleanup costs. today, the beaches and gulf are open for everyone to enjoy -- and many areas are reporting their best tourism seasons in years. we've shared what we've learned with governments and across the industry so we can all produce energy more safely.

i want you to know, there's another commitment bp takes just as seriously: our commitment to america. bp supports nearly two-hundred-fifty thousand jobs in communities across the country. we hired three thousand people just last year. bp invests more in america than in any other country. in fact, over the last five years, no other energy company has invested more in the us than bp. we're working to fuel america for generations to come. today, our commitment to the gulf, and to america, has never been stronger. ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold new styling, unsurpassed luxury and nearly 1,000 improvements. introducing the redesigned 2013 glk. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz

financial services.

welcome back to the "kudlow report." congressional republicans are ramping up pressure on the obama administration tonight. after two weeks of changing stories from the white house following the libya terror attacks. tonight, four gop senators sending a letter to susan rice calling for answers. >> we welcome back to the program senator ron johnson of wisconsin. mr. johnson, thank you, sir. you and a handful of other senators have written a tough letter to u.n. ambassador susan rice. can you tell us what's in that letter and what prompted you to write it? >> well, you know, we are calling on ambassador rice to explain the inaccuracies on the news shows. following the killing of ambassador stevens in benghazi.

and really, it was very apparent, larry, very early on that this was a pre-planned attack. the libyan president said it was a pre-planned attack. and you have the ambassador of the united nations for the united states coming on and misleading the public. basically we have sent a letter to ambassador rice to explain herself. >> you know, there's a story out today, i didn't know if you saw it, senator, but the story essentially was that the united states government within 24 hours knew it was a pre-planned terrorist attack. your thought on that. because that indicts rice and whomever else was in this cover-up even more. >> that's right. ambassador rice came on the sunday morning programs and said that, in fact, it was a spontaneous reaction of course to the video. and in no way was an expression of hostility toward america. and you have to say killing four american heroes, quite honestly, attacking our consulate, if that's not hostility toward

america, i don't know what it is. so, no, i think it's pretty apparent that the administration must have known, had information, and ambassador rice was sent out on the sunday programs to mislead the american public. i find that outrageous, and i think she needs to explain herself and explain herself fast. we should also call for an investigation. right now the state department has an accountability review board that will do its own review, but it's going to take 60 days to get that information. we need that information now because hostilities are -- have broken out across the middle east. and this administration's trying to say it's not in reaction to american policy that it's in reaction to this pretext of a video. it's not. it has nothing to do with a video. it's all about the fact that america is losing influence in that part of the world. we are withdrawing, and i think it just shows when america withdraws from the world, the world becomes a more dangerous place, not a more peaceful place. >> when a u.n. ambassador goes on a bunch of sunday talk shows and i believe you used the word

mislead, some people have used the word falsehood, others have used the word lying. at this point, given what we know, she was completely wrong and dishonest with the american public. why shouldn't she resign? >> well, what i'm asking for her to do is first of all, explain herself. if she has an explanation, let's get that on the table. i'm willing to give her that latitude right now. get out here and explain herself. if she can't explain herself, i would be right onboard with your result. >> and don't you think that secretary of state hillary clinton was quite aware of this also? that she may have given the order, she may have told rice what to say. rice reports it's the function through the state department. what's her role in this? >> i'll tell you what, larry, i was one of those senators being briefed on ebl it was september 20th, and we were told that as long as we had questions, i was the last one asking questions, and they cut off the questioning. i was not at all satisfied with that briefing.

because we woke up the following morning, larry, we found out far more in a "new york times" article and "wall street journal" article than we were ever briefed during that supposedly secure briefing. >> all right. going to leave it there. senator ron johnson of wisconsin. thank you, sir, we appreciate it very much. >> have a good night. all right. let's get right to our special guest tonight and pursue some of this iranian stuff. joining me now is syndicated talk show host john bachelor. good evening, john. ahmadinejad wants to wipe israel off the map, annihilate israel, eliminate israel. and i want to ask a simple question that law professor from harvard asked. do you believe that the united states including president obama takes them seriously, ahmadinejad is saying this stuff, do you believe our government understands their determination? >> yes, i do, larry.

i think the president and the national security apparatus understands that the regime is on its way out but they are firmly in control of a predatory state that all of that represents a threat to the region to the gulf and to the world. the president of the united states in his remarks to the united nations on monday, i'm told, however, was making it very clear to the leadership in tehran that nothing, nothing will happen between now and november 6th. we've called off the dogs, larry. they know they're free for the next six weeks. >> that can't be a good thing, john. let me pursue this for a second. you're saying that the ruling of leadership in iran is going to change. that ahmadinejad is going out. who's going to replace him? another nut case. who's going to replace him? >> the supreme leader is completely in charge. and the council of advisers, the council of experts is supervising a rogue state. this is a gang, larry, they conduct themselves as gangsters,

much like we saw 70 years ago in europe. there is no accountability. the supreme leader rules absolutely. ahmadinejad was a youthful spokesman. he now wanders off the stage. >> listen, i'll ask you, john, to your knowledge, he would like to hear president obama say that the united states is prepared to take decisive, military actions to stop nuclear weaponization in iran. do you believe that? do you think obama has made that clear? derschowitz does not. >> i'm told from my sources that the president of the united states is offering negotiation, has been for years. this president is an idealistic young president. he believes that as nixon went to beijing in 1972, he will go to tehran and make peace for the globe in a handshake with the supreme leader. that is his vision, larry. >> how realistic is that, john,

in the last few moments here? that sounds to me like something way out of left field. >> it is. larry, it's not even in the ballpark, larry. this is a predatory regime and they only have one future. and that's off the planet. >> all right. so the threat goes on. john batchelor, thank you, my friend. we appreciate it very much. yesterday it was spain, today greece, are violent pictures like these once again the norm in europe? and are the bailouts still coming or will they fall victim to the new violence. coming up also, "2016" the movie, the ferocious attacks launched by the president, plus dirty tricks to suppress the high-grossing film. facing off live onset next on the "kudlow report." jack, you're a little boring.

boring. boring. [ jack ] after lauren broke up with me, i went to the citi private pass page and decided to be...not boring. that's how i met marilyn... giada... really good. yes! [ jack ] ...and alicia.

♪ this girl is on fire [ male announcer ] use any citi card to get the benefits of private pass. more concerts, more events, more experiences. [ jack ] hey, who's boring now? [ male announcer ] get more access with the citi card. [ crowd cheering, mouse clicks ] welcome back to the "kudlow report." so the producers behind the wildly successful political documentary "2016: obama's america," they say slime ball tactics from the left are keeping potential audiences out of the theaters and away from the film. all of this after the film maker spent the weekend defending their film from piracy and false rumors it would air for free on tv. so let's talk here now with keith boykin, former clinton white house aid and president of the kings college and the film maker and author behind "2016:

obama's america." danesh, people are trying to stop the movie and putting it for free on youtube. why are they doing this? >> well, the first strategy on the left, hoping it goes away. you can go into an entire network and not even know the film existed. then the obama campaign came out swinging, that was strategy two, blast the film. >> well, they basically said this film is full of errors. obama never said he was against american exceptionalism. obama has not given money to brazil to drill for oil. point after point i refuted this and showed wrong, wrong and wrong again. so now strategy number three is you can't discredit the film, lowball it. false rumors, blast e-mails out saying the film is coming out for free and hackers breaking into sites and putting, uploading the whole film on youtube. so we've taken it down. it's still on some of these peer-to-peer sites, but it's a way of saying don't go see the film in the theater because you can look at it for free on the internet or alternatively you

can see it on tv, which is a completely false rumor. >> keith boykin, so far this film has grossed $32 million. and i have seen the film. my take away is even if you don't agree with the film, you have to acknowledge it's a well-made film. now, first question. what have the obamacons launching this attack? why are they doing this? >> i don't know why the obama people are responding to what dinesh says, i guess it's because what he says is not true. and anybody who has watched president obama for the past 3 1/2 years as president can tell what kind of president he is. they don't need dinesh to go back into history from the 1960s and '70s and tell them, oh, obama was a kenyan, oh, he has the history from his father. that's nonsense. i've known barack obama since i went to law school with him. i've known dinesh, since we were at college. i can tell you he doesn't know what he's talking about with barack obama. he's completely wrong.

>> the idea that obama gets his dream from his father, it's not my idea, it's obama's idea. have you seen the title about his autobiography, it's about how he was obsessed with his absentee dad. there's a whole history here. obama's founding fathers, all all the people who have shaped his ideas, it's all in the film. the problem is not the film is false, the problem is that if film is true and that's why the low-ball tactics, otherwise you tell people, go see the film. >> you should go see it because i think what people will see is how ridiculous it is. that we're supposed to judge barack obama based on your assumption of him from history from years ago instead of looking at what he does as president of the united states. it makes no sense. i don't think if it's the highest grossing film in history, it's full of crap. it's baa loloney, and the ameri people can see through it. go see it. go see it. >> do you not agree that barack obama would like to see america with a smaller footprint on the

world stage? and i've seen even people on the left who think that. >> i think barack obama would like to see america with a smarter footprint on the world stage. and it's contradicted by his own story that he talked about in his convention speech where he said only in america is this story even possible. dinesh knows that. he researches history. this is all about making money for dinesh so he can make more famous, more -- i think it's a wonderful strategy for you, dinesh, to make a lot of money. but the reality is, you're not telling the truth, and you ought to be ashamed of yourself. >> i'm glad you work for free. >> it's not true. >> i'm glad you work for free. look, obama was asked, do you believe in american exceptionalism, i now quote him. i believe in american exceptionalism just as the british believed in the british exceptionalism. no one really is. there's no -- >> your translation, instead of

barack obama's own words in his 2004 convention speech. >> i quoted his words. >> where he said only in america is my story possible, dinesh. the reason the american people are voting for barack obama, the reason he's ahead ten points in ohio is because they realize he actually cares about them and understands about them and not busy trying to control some of these conspiracy theorys that the right wing has been trying to push. this is part of the whole birther nonsense that you're behind. it's disgusting. >> you're right. so this is the problem that this is basically a kind of -- the film doesn't sound like this. the film is measured. it takes you from hawaii to indonesia to kenya. we interview people who knew obama, knew his dad. i interview obama's half brother. many times in the film you see obama doing very incriminating things. you see him lean over to medvedev and whisper to him -- >> conspiracy theory. >> yeah, let's talk after the election medvedev, i've got some

stuff to give you, but if i tell the american people now -- >> the president of the united states. we can look at his record. >> the mike wasn't on. oh, the mike wasn't on, my friend. that's what he didn't want the american people to know. >> it doesn't make a difference -- >> because he cares so much, right? we don't have to listen -- >> you are smart enough to know what the american people don't know is ridiculous and you ought to be ashamed of yourself. >> you go to dartmouth together? >> i went to dartmouth because he was there. >> okay. >> because he's been fermenting this nonsense. >> for 30 years now, i cannot contribute. >> i'm glad you do, larry, but the reality is they've done some evil things. i was there when they did evil things. and i don't want to get into dinesh about dartmouth, but what he's doing against president obama is wrong and shameful. and you ought to be ashamed. >> classic obama support, unable to deal with arguments. >> tell me a fact. tell me one fact. >> we'll leave it there. thanks.

dartmouth college. could be a slogan. coming up on "kudlow," violence breaks out in spain and greece. and madrid protesting higher taxes and job cuts for public workers. the full story up next. now, that's what i call a test drive. silverado! the most dependable, longest lasting, full-size pickups on the road. so, what do you think? [ engine revs ] i'll take it.

[ male announcer ] it's chevy truck month. now during chevy truck month, get 0% apr financing for 60 months or trade up to get the 2012 chevy silverado all-star edition with a total value of $8,000. hurry in before they're all gone! sleep train's inveis ending soon. sale save 10%, 20%, even 35% on a huge selection of simmons and sealy clearance mattresses. get 2 years interest-free financing on tempur-pedic.

even get free delivery! sleep train stacks the savings high to keep the prices low. but hurry, the inventory clearance sale is ending soon. superior service, best selection, lowest price, guaranteed. ♪ sleep train ♪ your ticket to a better night's sleep ♪

violent protests spreading across europe. thousands are rioting in the streets of spain and greece over anti-austerity measures. michelle caruso-cabrera has all the details. good evening, michelle. >> larry, for the second night in a row, thousands of protesters in the streets of madrid. they were there because they're angry about coming austerity measures that are expected to be announced tomorrow. they don't know the details, but they're likely to include something that will affect pensions, salaries, government jobs. they're very, very angry, at least tonight we do not see violence. very different from what we saw last night where police were beating protesters, shooting them with rubber bullets and pushing them back from the parliament as they try to surround it. we saw that again tonight, but again, it was a lot more peaceful than we saw 24 hours ago. very different picture in athens, greece, where once again there was violence. we saw molotov cocktails being

thrown by the crowd of police, police using tear gas to disperse the crowds. that only lasted a couple of hours, it's smaller than the protests we've seen in the past in athens, but the story there is exactly the same. there will be more austerity, more budget cuts, more tax increases as they struggle to balance their budgets, and they continue to bring in less and less tax revenue as their economy sinks in to recession. larry, back to you. >> all right. many thanks to cnbc's michelle caruso-cabrera. coming up on "kudlow," are we heading for a new wave of higher inflation? well, a former fed big wig gives us his thoughts on the topic next up.

i'm bara ck o bama and i approve i'm bara this message. ck o romney: "it's time to stand up to the cheaters" vo: tough on china? not mitt romney. when a flood of chinese tires threatened a thousand american jobs... it was president obama who stood up to china and protected american workers. mitt romney attacked obama's decision... said standing up to china was "bad for the nation and our workers." how can mitt romney take on the cheaters... when he's taking their side? has oats that can help lower cholesterol? and it tastes good? sure does! wow.

it's the honey, it makes it taste so... well, would you look at the time... what's the rush? be happy. be healthy. [ male announcer ] introducing a reason to look twice.

the entirely new lexus es and the first-ever es hybrid. this is the pursuit of perfection. stocks close in the red again as ongoing financial worries in europe spook investors. my next guest says the luster of qe will get old and the fed is no longer in the business of deflation. get this, it's all about inflation from here on out. okay. here now is an old friend of the show, the former director of monetary affairs a the the federal reserve board. now, he is the chief of u.s. economists at morgan stanley. vince, welcome back to the show. >> thanks for having me, larry. >> all right.

let me get this right. paul krugman, one, and now ben bernanke is pushing for higher inflation. is his real inflation target not 2%, but like 4%, 5%? if he could wave a magic wand, would he do that? >> they could have a secret vote. it would be in excess of three, for sure at least in the near term. the fed told us they would do whatever it takes to get what they want. they haven't exactly told us what they do or what they want. >> all right. what they want is a lower unemployment rate, isn't that fair? >> right. but they have lower unemployment in the price stability. what's going to happen is you're going to get fomc participants litigating the issue in public. like charlie plaszer yesterday talking about how policy won't be effective and charlie evans today talking about -- >> but they always do that. bernanke, that board is all obama appointees. and it's the liberal left

keynesian board. it's an inflationist board. you as great economist and forecaster, right now the inflation numbers, they don't look scary at all. cpi, so forth, commodity prices, none of that stuff is booming. what do you think is the earliest time? a year from now, two years from now, when, that we would actually see something like a 3% or 4% inflation? >> our forecast of morgan stanley is real short rates stay low for a long time. inflation stays contained over the next couple of years. but three to five years out, there's a decided inflation risk because central banks never unwind their policy accommodation as quickly as they could do. >> do you think this quantitative easing, the first two produce the recovery the lowest in the postwar period, 2% or more didn't work. is qe-3 going to work because it's open-ended? because they'll keep doing this every month creating $40 billion

in perpetuity? is that why they think it's going to work? >> first is after a severe financial crisis you always grow more slowly. someone you might remember, carmen and i wrote a paper for jackson hole two years ago showing that after a severe financial crisis, economies should grow more slowly. >> i haven't totally signed on to it because reagan has his financial crisis too with 20% interest rates and we had tremendous spring board after dropping by a lot, the economy grew by 7%, 8%, 9%. >> we look at the 15 more severe financial crisis of the second half of the 20th century. that wasn't one of the episodes. we're talking about big hits. second part, what is the fed doing? exactly what you're saying. if you think your instrument is diminishing ineffectiveness, go open-ended because you can't announce up front how much you need to do to get better economic performance, just indicate meeting after meeting and let market participants figure out it's going to accumulate to a lot.

>> what should stock market investors think about all this? the initial reaction was good. we're getting a little flattening out, but probably a necessary correction. might have something to do with the european violence. i don't know. what does a stock market investor do? does more money lead to more even a whiff of inflation and that's good for stocks? does that rule hold? >> so it's always tough to fight a wave of liquidity. >> right. >> we saw it in europe, saw it in the fed. it's also the case that waves crest. and so from an equity market investor, you've got to think about the fundamentals. and the fundamental property is the world's a risky place. we've got an ongoing sovereign and banking crisis in europe. do you know what the top marginal income tax will be in the united states in five months? if you don't know -- >> about 45% if we don't get serious changes here. >> that means ceos right now don't know what it is. it means that we're having trouble. >> you're actually not -- you're kind of worried about this story. >> i'm a cautious pessimist.

>> cautious pessimist. >> right. the pessimism is we haven't dealt with our fundamental problems, fiscal consolidation, having a grown-up fiscal policy, having a monetary policy commensurate to that. >> chris rinehart, former director of monetary affairs is cautiously pessimistic that despite all this fed pump priming, be honest, nobody else wants to come on the show and say that. coming up, the business round table survey just out shows ceos now more pessimistic about jobs and economic recovery. fingers seem to be pointing at obama, however. and our special guest is the ceo of dow chemical joins us.

♪ forz(power!) andiamo! andiamo! (let's go! let's go!) avanti! avanti! (keep going! keep going!) hahaha...hahahaha! you know ronny, folks who save hundreds of dollars by switching to geico sure are happy. and how happy are they jimmy? happier than christopher columbus with speedboats. that's happy! get happy. get geico. fifteen minutes could save you fifteen percent or more. ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken. ♪ to help you not just to stay alive... but feel alive. the new c class is no exception. it's a mercedes-benz through and through.

see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services.

the results of the business round table economic survey are in. and they aren't pretty. the survey shows ceos are now pessimistic about the economy, jobs, and recovery as pessimistic as they've been since the middle of 2009. so is this cloudy view from the corner office sparked by president obama's failed policies? and what role does world tensions play in all of this? here now, we welcome back president, chairman, and ceo of the dow chemical company. andrew, you're awfully nice to do this. i want to talk about the survey in a second. but, you know, we got ahmadinejad here at the u.n. causing trouble, making o outlandish statements, and we have this blowout in the middle

east. let me just ask you as a distinguished long-serving ceo, if israel declares war on iran, what does that do to the situation? how do you react to that? >> well, as you know, when you run companies that have seen war depression and everything, everything from cold wars and actual wars, obviously you fortify your base and you do your best. to really shelter the risk. and geopolitical tensions escalate to wars, we've seen a few in the last decade or two. and you've got to attach yourself very closely to the people that matter, that can give you the best intelligence on the ground, protect your assets, protect your installations if you like, and, of course, figure out what it means really to growth or the lack thereof. in a very strange little way, actual war creates a different type of growth because governments spend very heavily on it. but, you know, that's of course, a very bad outcome of a situation that none of us want

to see. >> if you couple a potential -- it's a threat, all right. and there's a lot of talk that israel might go after iran. you know this as well as i do. even before the american election. now we have this most regrettable tragic, the deaths in benghazi and our consulate in libya and the extremists are at it again. blowing up in the middle east. is this the kind of thing that would put business on hold? that where business would pull on its horn and put a freeze on because they just can't see the future, call it the fog of war, call it whatever. >> yeah, i think so, larry. i think the fog of war is a good term. geopolitical tension of this type is acute and therefore it would cause a retrenchment because it amplifies uncertainty. of course, we have inflicted political uncertainty that is the other uncertainty. so the two together would cause a very, very bad economic reaction. i have no doubt. >> all right. let's go back to the domestic stuff. the survey was as pessimistic as

it's been since the middle of 2009. it talks a lot about washington. are you critical of obama's leadership? has he basically failed? and should he be replaced now? >> look, let me speak about being attached to the system of government for the united states government, which is beyond the white house and beyond this president. government is failing us as a whole. it's the institution of government. and i mentioned self-inflicted political uncertainty. let me make a quick point. we've had three major political uncertainties not additives, but, in fact, multiplying each other and a fourth looming. the debt ceiling debate last year sent us in to a spiral. the discussion out of europe and the lack of a solution on the sovereign debt issue amplified the spiral. the chinese handover, which is not going well is causing an economic slowdown, almost freefall over there. those three things are amplifying economic events, causing business to not invest.

and therefore in the united states, this looming fiscal cliff is the fourth data point that's a multiplier. you put all that together, that is a failure of politics. in essence, you know, whichever president it is and whichever congress it is, they're not working out solutions. >> that's where i was going to go. because, you know, whichever president matters a whole lot. i just want to ask your personal view. i've known you a long time. mr. obama had a chance to make a deal a year ago with john boehner and it fell apart because at the last minute obama demanded another $400 billion in revenues. it could have been a grand design deal. we were that close to it. i want to ask you, do you believe from mitt romney's business experience that he would be a better deal maker, taxes, revenues, tax reform, spending cuts, deficits, you know the drill. do you believe romney has a better background to be a better deal maker, because the deal is what we're going to need in washington. >> well, the chief deal maker and if that's the president,

clearly the romney resume is better that way. but to have a deal, you need the other side. and so i think last year's event, each party was culpable there. and the other thing you'd say is, who's actually in the deal room? it's not just the chief negotiator. i negotiate deals at the last minute. i'm brought in at the last minute. the top guy isn't the guy that does the deal. he's the one that keeps the deal moving. and that's the failure that we've seen. that the deal simpson/bowles as our new ceo led fiscal reform, fiscal cliff address is addressing, dave cody and others in this discussion from honeywell, saying we had the simpson/bowles formula and no one took it further. we just parted ways and are waiting for the system to give us an answer. >> i told you collectively you should have run. i told you you should have run

the last time we talked. you would have been perfect. thank you very much for your time, sir. we appreciate it. andrew liveris, the chairman and ceo of dow chemical. all right. that's it for tonight's show. i appreciate you watching. i just want to end where i began. mitt romney, do not renege on your tax-cutting pledge. middle class people need higher take-home pay. the best way to do that in this environment is to lower marginal tax rates for the middle class. don't go back on your pledge, mr. romney. i'm larry kudlow. we'll be back tomorrow. i'm bara ck o bama and i approve i'm bara this message. ck o romney: "it's time to stand up to the cheaters" vo: tough on china? not mitt romney. when a flood of chinese tires threatened a thousand american jobs... it was president obama who stood up to china and protected

american workers. mitt romney attacked obama's decision... said standing up to china was "bad for the nation and our workers." how can mitt romney take on the cheaters... when he's taking their side? the silverado's powertrain warranty is 40,000 miles more than ford. and this workhorse gives you the power of a v8 with the highway fuel economy of a v6. incredible! right? an amazing test drive. i agree. [ male announcer ] it's chevy truck month. now during chevy truck month, get 0% apr financing for 60 months or trade up to get the 2012 chevy silverado all-star edition with a total value of $8,000. hurry in before they're all gone! humans -- sometimes life trips us up. and sometimes, we trip ourselves up, but that's okay. at liberty mutual insurance we can "untrip" you

as you go through your life with personalized policies and discounts when you need them most. just call... and speak with a licensed representative about saving on your policy when you get married, move into a new house... [crash!] or add a car to your policy. don't forget to ask about saving up to 10% when you combine your auto and home insurance with liberty mutual. security, coverage, and savings. all the things humans need to make our beautifully imperfect world a little less imperfect. call... and lock in your rate for 12 months. liberty mutual insurance. responsibility. what's your policy? we create easy to use, powerful trading tools for all. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! strategies, chains, positions. we put 'em all on one screen!

could we make placing a trade any easier? mmmm...could we? open an account today and get a free 13-month e ibd™ subscription when you call 1-888-280-0149 now. optionsxpress by charles schwab. >> this is a cnbc original. >> tonight, a new look at a hit business like no other, with a punch as powerful as its profits. >> and here we go. >> "ultimate fighting champion", a league that's battled its way to the top of mix martial arts. and won the backing of corporate america. >> that's what the fans like to see. >> cnbc's scott wapner goes one on one with dana white, the front man who took a dying franchise... >> we bought this thing, when it was a-as low as it could possibly get. >> nearly dead. >> dead-- no, it was dead. >> and turned it into a global sensation. >> when you first started out, in your wildest dreams did you ever think